Multiple Choice
Table 1 shows the financial position of the Smithville Bank. Which of the following financial statements would most likely present this information?
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1. Introduction to Accounting
The Financial Statements
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The income statement reveals the:
A
company's assets, liabilities, and equity at a specific date
B
company's revenues and expenses over a specific period
C
changes in shareholders' equity over a period
D
cash inflows and outflows during a period
Verified step by step guidance1
Understand the purpose of an income statement: It is a financial report that summarizes a company's revenues and expenses over a specific period, providing insight into its profitability.
Differentiate the income statement from other financial statements: Unlike the balance sheet, which shows assets, liabilities, and equity at a specific date, the income statement focuses on performance over time.
Recognize the components of the income statement: Key elements include revenues (income earned from operations) and expenses (costs incurred to generate revenue).
Clarify what the income statement does not include: It does not show changes in shareholders' equity (covered by the statement of changes in equity) or cash inflows/outflows (covered by the cash flow statement).
Conclude that the income statement reveals the company's revenues and expenses over a specific period, making it distinct from other financial statements.
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